News Article
Capital spending discrepencies
A new sampling by IC Insights of first half 2005 actual capital spending outlays by 14 large semiconductor companies shows that five manufacturers spent less than 50 percent of their current budgets in the first six months of this year.
A new sampling by IC Insights of first half 2005 actual capital spending outlays by 14 large semiconductor companies shows that five manufacturers spent less than 50 percent of their current budgets in the first six months of this year. The 14 companies represent 56 percent of the worlds total semiconductor capital spending budgeted for 2005, according to IC Insights Strategic Reviews Online database, which profiles device makers and tracks investments in manufacturing capacity worldwide.
Silicon foundry giant TSMC spent almost two thirds of its $2.6 billion annual budget in the first six months of 2005, while Philips Semiconductors only used about one-third of its planned outlays in the same six-month period. With the 14 sample companies having collectively spent 55 percent of their total 2005 budgets in the first half of the year, semiconductor equipment suppliers should not expect strong second-half sales. Moreover, companies like Chartered Semiconductor, Texas Instruments, Philips, and Semiconductor Manufacturing International Corp. (SMIC)—big potential spenders that spent less than 50% of their budgets in the first half of the year—should be watched especially closely in the second half of the year for any signs of wavering from their current spending plans.
In fact, Shanghai-based SMIC recently announced it trimmed its 3Q05 capital spending budget to a range of $120-160 million from a previous estimate of $200-240 million because of longer lead times for fab equipment and delays in qualifications for advanced technology nodes. SMIC managers indicated that delayed tool installations will be completed in 4Q05. Earlier in September, Royal Philips Electronics NV said it would cut $300 million in annual costs from its semiconductor business by the end of 2006. The Dutch company did not provide details about those cost reductions, except to say it intends to lower manufacturing and research spending.
Despite some belt tightening by cautious semiconductor companies, the outlook for industry capital spending appears to be holding steady through the end of next year. IC Insights updated survey of capital spending plans at 46 major semiconductor manufacturers shows industry expenditures being flat in 2005 and flat or just slightly down in 2006. Other analysts are predicting strong growth for the remainder of the year.
Silicon foundry giant TSMC spent almost two thirds of its $2.6 billion annual budget in the first six months of 2005, while Philips Semiconductors only used about one-third of its planned outlays in the same six-month period. With the 14 sample companies having collectively spent 55 percent of their total 2005 budgets in the first half of the year, semiconductor equipment suppliers should not expect strong second-half sales. Moreover, companies like Chartered Semiconductor, Texas Instruments, Philips, and Semiconductor Manufacturing International Corp. (SMIC)—big potential spenders that spent less than 50% of their budgets in the first half of the year—should be watched especially closely in the second half of the year for any signs of wavering from their current spending plans.
In fact, Shanghai-based SMIC recently announced it trimmed its 3Q05 capital spending budget to a range of $120-160 million from a previous estimate of $200-240 million because of longer lead times for fab equipment and delays in qualifications for advanced technology nodes. SMIC managers indicated that delayed tool installations will be completed in 4Q05. Earlier in September, Royal Philips Electronics NV said it would cut $300 million in annual costs from its semiconductor business by the end of 2006. The Dutch company did not provide details about those cost reductions, except to say it intends to lower manufacturing and research spending.
Despite some belt tightening by cautious semiconductor companies, the outlook for industry capital spending appears to be holding steady through the end of next year. IC Insights updated survey of capital spending plans at 46 major semiconductor manufacturers shows industry expenditures being flat in 2005 and flat or just slightly down in 2006. Other analysts are predicting strong growth for the remainder of the year.
